Don’t you wish for a magic mantra that can double or quadruple your hard-earned money?
This bait of quick returns has always lured investors towards the stock markets, but the bad news is making money in equities is a bit of a challenge in itself. The good news is with a little bit of money, lots of discipline, patience, in-depth research and understanding you have a chance to succeed. So here is our guide for you to move slowly and cautiously towards the market.
Investing in equity comes with its own risks, at times completely out of your control. Factors like market volatility can hold a major risk to your investments. Certain economic events or inflation can also be factors which can sweep off your investments within minutes.
All the economies are bound to one another, so events like recession in the US markets, China pulling out of a trade deal or a Brexit could make the markets volatile, putting your hard-earned money to risk. These events are not something you can control. Changes in interest rates, tax revision, regulation, deregulation, or weather could also have a major impact on the businesses and industries listed on the stock exchange. Changes in purchasing power could create an inflation risk, as well as pressure on losses gradually reducing the purchasing power.
Timing The Market:
Keep in mind there never is a good time to buy or sell in the market. A lot of investors have faced high losses trying to wait for the lowest dip to buy or the highest peak to sell. The truth is no one can time the market, not even the market experts. Markets adjust to new data every moment, so there is no undervalued or overvalued stock.
There are moments in the market where you can get lucky and gain a lumpsum which should refrain you from concentrating on a single sector. Luck can bring in a bit of greed and certainty convincing you are making the right choice thereby leading you to maximising your profits and time the market.
Don’t try to time the market: The market moves in cycles and there are many indicators which give you the idea of when to buy or sell but those need not necessarily be accurate or consistent.
Diversify your risk: Spreading your investments across various helps you de-risk as it is impossible to predict geopolitical factors. Diversifying in different sectors will help you cushion your fall if any uncertainty catches the market. Staggering your investments will give you a better chance of participating in the growth of some of your stock at one time.
Conservative Investor: There is nothing wrong with investing small or buying at every dip and being careful about your investments. Yes, the risks will be low but so will returns, on the bright side you are dodging volatility and potentially larger losses.
Avoid borrowing: Don’t borrow money from a financial institute to invest in the market. If your investments don’t go as planned, the loan is likely to fall upon you to pay off without an additional income.
To sum up
Over a period of years, your income will rise and so will inflation. If you invest only in debt investments, your money will surely be safe but it will not grow. Equity investments will act as a hedge against inflation over the years, making your money work as hard as you do. You can take advantage of the returns to achieve your long-term goals and beat inflation, by showing a little bit of discipline.This is a partnered post.